New Government Urged To Help Stagnant Services Sector

Firms within the services industry have reported slowed growth, with the slowdown nearing recessionary conditions

Calls are being made for the incoming government to address the stagnant services sector which is “grinding the economy to a hault” – according to a report by BDO LLP.

Its latest Business Trends Report, which projects firms’ order expectations over the next three months, has revealed the BDO Index has fallen to 95.0 in May from 95.3 in April, the lowest level since June 2013.

Small businesses within the services industry have reported that growth in their order books has stopped – with the slowdown nearing recessionary conditions.

While there has been an overall downward trend since August 2015, it has become more pronounced since the EU referendum last year – with a significant drop in the value of the pound and in consumer spending.

In contrast, however, manufacturing output is increasing – with its BDO Index increasing from 0.6 from April to May, and now sitting at 97.7.

The sector’s Optimism Index – which indicates how firms expect their order books to develop in the coming six months – is also at a three-year high of 116.4.

It’s suggested that the drop in value of the pound has made UK products cheaper, and thus, attracted more international buyers.

With regards a new government, following Thursday’s general election which resulted in a hung parliament, formal negotiations between the Conservatives and the DUP about forming a minority government are ongoing – though there remains uncertainty over whether a deal will be agreed.

Peter Hemington, partner at BDO LLP, said:

“Business activity in the UK’s services sector is definitely slowing down, with many blaming this on the snap election. But the downward trend is clearly much more deeply rooted than this. Surprisingly, UK businesses remain optimistic about the future, but an immediate recovery seems unlikely.

“The new government should be quick to announce immediate pro-business measures to ensure we aren’t left disappointed with an increasingly stagnant economy as we go through the rest of the year.”

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